Which Approach is most suitable in Corporate Governance ?

There are several ways of looking at this question. If we were to try to find out which approach is most prevalent, it is certainly the shareholder’s approach. It is easy to understand why most boards follow this approach - they are elected by and are accountable to shareholders. Most shareholders, particularly those holding a controlling interest in the company, are not willing to pay adequate attention to the interest of any other stakeholder.

If we were to ask ourselves as to which approach is the most desirable from the point of view of the society as a whole, it would be stakeholders’ approach. If all those whose interests are attached to a company are looked after equally well, it will contribute to betterment of the overall investment climate in the country.

However, if we were to decide as to which approach is most practical and helpful at the same time, it would be enlightened shareholders’ approach. This of course implies that shareholders should be prepared to be enlightened, i.e. willing to pay adequate (if not equal) attention to the interest of all stakeholders.